Publication 505 - Tax Withholding And Estimated Tax Page 2
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49amount withheld is paid to the Internal
$150,000 ($75,000 if married filing a separate
either a full-time student or not able to
Revenue Service (IRS) in your name.
return), you must have deposited the smaller of
care for himself or herself increases. This
90% of your expected tax for 2002 or 112% of
amount increases to $250 a month if there
•
Estimated tax. If you do not pay your tax
the tax shown on your 2001 return to avoid an
is one qualifying individual and $500 a
through withholding, or do not pay enough
estimated tax penalty.
month if there are two or more qualifying
tax that way, you might have to pay esti-
individuals.
mated tax. People who are in business for
themselves generally will have to pay their
Tax benefits for adoption. Beginning in
tax this way. You may have to pay esti-
Important Changes
2003, the adoption credit and the exclusion from
mated tax if you receive income such as
income of benefits under an adoption assistance
dividends, interest, capital gains, rents,
for 2003
program for the adoption of a child with special
and royalties. Estimated tax is used to pay
needs is $10,160 regardless of the amount of
not only income tax, but self-employment
This section summarizes important changes
qualified adoption expenses.
tax and alternative minimum tax as well.
that take affect in 2003 and that could affect your
This publication explains both of these methods.
Retirement savings plans.
The following
estimated tax payments for 2003. More informa-
It also explains how to take credit on your return
paragraphs highlight changes that affect individ-
tion on these and other changes can be found in
for the tax that was withheld and for your esti-
ual retirement arrangements (IRAs) and pen-
Publication 553.
mated tax payments.
sion plans. For more information, see
Standard mileage rates.
For tax years begin-
Publication 590, Individual Retirement Arrange-
If you did not pay enough tax during the year
ning in 2003, the standard mileage rate for the
ments (IRAs).
either through withholding or by making esti-
cost of operating your car decreases to:
Traditional IRA income limits. If you have
mated tax payments, you may have to pay a
•
a traditional IRA and are covered by a retirement
penalty. The IRS usually can figure this penalty
36 cents a mile for all business miles
for you. This underpayment penalty, and the
plan at work, the amount of income you can
driven,
exceptions to it, are discussed in chapter 4.
have and not be affected by the deduction
•
12 cents a mile for the use of your car for
phaseout increases. The amounts vary depend-
medical reasons, and
Comments and suggestions. We welcome
ing on filing status.
your comments about this publication and your
•
12 cents a mile for the use of your car for
Deemed IRAs. For plan years beginning af-
suggestions for future editions.
determining moving expenses.
ter 2002, a qualified employer plan (retirement
You can e-mail us while visiting our web site
plan) can maintain a separate account or annu-
at
ity under the plan (a deemed IRA) to receive
Lifetime learning credit. Beginning in 2003,
You can write to us at the following address:
voluntary employee contributions. An
the amount of qualified tuition and related ex-
employee’s account can be treated as a tradi-
penses you may take into account in figuring
Internal Revenue Service
tional IRA or a Roth IRA.
your lifetime learning credit increases from
Tax Forms and Publications
$5,000 to $10,000. The credit will equal 20% of
Limit on elective deferrals.The maximum
W:CAR:MP:FP
these qualified expenses, with the maximum
amount of elective deferrals under a salary re-
1111 Constitution Ave. NW
credit being $2,000.
duction agreement that can be contributed to a
Washington, DC 20224
qualified plan increases to $12,000 ($14,000 If
Estimated tax safe harbor for higher income
you are age 50 or over). However, for SIMPLE
We respond to many letters by telephone.
individuals. For estimated tax payments for
plans, the amount increases to $8,000 ($9,000 if
Therefore, it would be helpful if you would in-
tax years beginning in 2003, the estimated tax
you are age 50 or over).
clude your daytime phone number, including the
safe harbor for higher income individuals (other
area code, in your correspondence.
Simplified rules for required minimum
than farmers and fishermen) has been modified.
distributions. There are new rules for determin-
If your 2002 adjusted gross income is more than
ing the amount of a required minimum distribu-
$150,000 ($75,000 if you are married filing a
tion for a year beginning after 2002. The new
Important Changes
separate return for 2003), you must deposit the
rules, including new life expectancy tables, are
smaller of 90% of your tax for 2003 or 110% of
in Publication 590.
for 2002
the tax shown on your 2002 return to avoid an
estimated tax penalty.
Self-employed health insurance deduction.
You can deduct 100% of your self-employed
You should consider the items in this section
Child and dependent care credit.
Signifi-
health insurance premiums as an adjustment to
when figuring any underpayment penalty for
cant changes to the child and dependent care
income.
2002. Figuring the penalty is discussed in chap-
credit take effect in 2003.
ter 4.
•
The credit amount can be as much as
Penalty rate. The penalty for underpayment
35% (previously 30%) of your qualifying
Important Reminder
of 2002 estimated tax is figured at an annual rate
expenses.
of 6% for the number of days the underpayment
•
The maximum adjusted gross income
remained unpaid from April 16, 2002, through
Photographs of missing children. The Inter-
amount that qualifies for the highest rate
December 31, 2002 and 5% from January 1,
nal Revenue Service is a proud partner with the
increases to $15,000 (previously $10,000).
2003, through April 15, 2003.
National Center for Missing and Exploited Chil-
•
The limit on the amount of qualifying ex-
dren. Photographs of missing children selected
Estimated tax safe harbor for higher income
penses increases to $3,000 for one quali-
by the Center may appear in this publication on
individuals. For installment payments for tax
fying individual and $6,000 for two or more
pages that would otherwise be blank. You can
years beginning in 2002, the estimated tax safe
qualifying Individuals.
help bring these children home by looking at the
harbor for higher income individuals (other than
•
The amount of income that is treated as
photographs and calling 1 – 800 – THE – LOST
farmers and fishermen) has been modified. If
having been earned by a spouse who is
(1 – 800 – 843 – 5678) if you recognize a child.
your adjusted gross income was more than
Page 2
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